We want to ‘make it easier for people to access these investment opportunities,’ Arrived Homes CEO says

Arrived Homes Co-Founder and CEO Ryan Frazier joins Yahoo Finance Live to discuss homebuilder sentiment data, real estate investment, and how tighter lending conditions are impacting homebuyers.

Video Transcript

- Well, for investors who want to get in on housing investments, the big price tag on real estate can be intimidating. But outright buying property isn't your only option. You could invest via REIT or real estate investment trust. Now, that's a company that invests in and manages a variety of real estate assets. Investors purchase the shares, much like they buy into a mutual fund, and receive dividends.

Enter Arrived Homes, offering a new spin on real estate investing. The Bezos-backed start up allows investors to buy shares of individual properties so you can be more selective about which properties you're putting money into. Arrived is also a private company, unlike a publicly listed REIT. Joining me now, Ryan Frazier, Arrived Home's co-founder and CEO. Good to have you on the show, Ryan. So for people who are looking at this--

RYAN FRAZIER: Hello.

- --homebuilder data coming in here-- thank you. So for people who are looking at this homebuilder dating and saying, OK, perhaps it's a little bit too high for me to get into, but perhaps I want to invest, what does Arrived do differently? What opportunities do you offer at the moment?

RYAN FRAZIER: Yeah. I think that's a great question. I mean, one of the things when you look at the homebuilder sentiment data today is that it's not evenly distributed across the country. You have areas like the South where the sentiment is about 10 points higher than the West. And I think retail investors are seeing the same thing, that different markets in real estate really matter. And with Arrived, we have today 40 different cities that retail investors can buy rental property or vacation rental property shares in. We're adding another 10 markets over the next quarter and really giving folks the ability to diversify their investment across these markets.

- So then how has your company been affected and sort of the inventory that you have available? How has that been affected by the interest rate as well as some of these tighter lending conditions that you're seeing from banks as a result of the fallout from SVB?

RYAN FRAZIER: Yeah. I think much like anything, the ability to go out and buy a home on your own as real estate prices have gone up and now as interest rates have continued to gone up has just become even more challenging. I think more and more people are realizing that there could be alternative paths to building home equity in the traditional sense. And so we saw for the first quarter of the year that we had the all time highest investment activity of retail investors coming in and investing about $20 million into rental properties and vacation rentals across the country.

And we're about up 50% quarter over quarter. And I think there really just is that strong demand. As you've seen that the stock market and other asset classes that's seen more volatility, retail investors are looking at something like real estate that has been very stable over the long term as a way to both preserve wealth but also to generate returns through rental income or property appreciation.

- And as we look at that dividend range on the screen there, between 2% and 15.1%, talk about the types of homes and the regions where you can really see that higher end of those dividends.

RYAN FRAZIER: Yeah. So the types of homes on Arrive today are all single family homes. And they are rented out on long-term leases or short-term leases, like Airbnbs. And that really kind of leads to the range and dividends. Some of the long-term rentals in higher appreciating markets like Phoenix or Denver or Nashville might see some of the lower dividends. If you look at areas of the country like the Southeast, you might be able to get in the kind of 5 and 1/2% to 6 and 1/2% on the potential dividend yield.

And then as you start to get into vacation rentals where there's some variability, there's some seasonality in terms of when people are booking these vacation rentals in different markets, and that can lead to some of those higher potential dividend yields like the 15% that you mentioned, but also carry with it potentially some higher risk in the seasonality of income. And then the other piece that's really not included in the dividend is any property value appreciation. And investors who are investing in these properties, they get the benefits of any of that property value as these properties grow.

- So talk about the process here because I was sort of playing around on the website. And some of these get fully funded very, very quickly. Walk people through the process and how competitive it actually is out there.

RYAN FRAZIER: Yeah. The process is very simple to-- or similar to investing in a stock. Individual investors can create an account on our website arrive.com. It takes just a few minutes to enter their information, pick and choose which properties they want to invest in, and then buy shares. And in just a couple of minutes, you can own your very first rental property. And we've seen thousands and thousands of people do that as their first way to access real estate investments. And that's really I think what we've been excited to bring to the market is just make it easier for people to access these investment opportunities.

- And for people who are concerned about risk, if this is their first time trying to invest in real estate, what should they be aware of?

RYAN FRAZIER: Yeah. I think in any kind of investment, there is risk. One of the benefits of investing in Arrived versus buying a property on your own is that the risk of your investment is limited to the capital that you're investing. So there's no debt or personal liability in your name. It's similar to investing in any company like Apple stock where you're not going to be liable for any of the debts that Apple is taking on. You're not liable for the mortgage that's on this property that might be providing you with leverage depreciation or potentially positive leverage on the rental income.

And I think for a lot of people, especially right now, there's aversion to taking on too much of that debt onto their own personal balance sheet. And this gives a way to access the positive benefits of that but limiting some of the risk associated with it.

- So at least a way to get in for the more risk averse real estate investor. Interesting stuff there. Thank you so much. Ryan Frazier there, Arrived Homes co-founder and CEO.